Credit risk mitigation techniques: Difference between revisions

Jump to navigation Jump to search

Credit risk mitigation techniques (view source)

Revision as of 09:58, 9 November 2016

1,648 bytes removed ,  9 November 2016
Replaced content with "{{crm techniques}} {{anat|crr}}"
(Created page with "CRM techniques are broken down as follows: *'''Collateralised transactions''': A bank has a credit exposure which it hedges<r...")
 
(Replaced content with "{{crm techniques}} {{anat|crr}}")
Line 1: Line 1:
[[CRM technique]]s are broken down as follows:
{{crm techniques}}
*'''[[Title transfer collateral arrangement|Collateralised transactions]]''': A bank has a [[credit exposure]] which it hedges<ref>This is what it says, and I suppose it is true, even though this is a curious way of describing it</ref> [[in whole or in part]] by {{csaprov|collateral}} posted by a counterparty or a [[credit support provider]].
 
*'''On-[[balance sheet]] {{tag|netting}}''': Legally enforceable [[close-out netting]] arrangements covering multiple transactions with offsetting [[mark-to-market]] values.
 
*'''{{tag|Guarantee}}s and [[credit derivative]]s''': {{tag|Guarantees}} provided by third parties (whose [[credit risk]] isn't materially correlated to the counterparty’s) or {{tag|credit derivative}} transactions.
 
{{Box|
===An Important point ===
Note the difference between [[CRM technique|techniques]] which mitigate a credit risk that you nonetheless have — as above — and those which negate the [[credit exposure]] in the first place. So, ''par example'', a [[title-transfer collateral arrangement]] whereby a bank transfers outright {{tag|collateral}} to a counterparty may, as part of  a valid netting agreement, mitigate that collateral but will leave you with an exposure to any [[excess collateral]] or [[haircut]]; however transfer under a [[pledged collateral arrangement]] — at least [[to the exent]] that you don't surrender legal title to the collateral at all — will leave you with no counterparty {{tag|credit exposure}} at all to the haircut or excess, seeing as it is yours, and if the counterparty goes [[bust]], you will be entitled to have it returned in full.
}}
 


{{anat|crr}}
{{anat|crr}}
Retrieved from "https://jollycontrarian.com/index.php?title=Special:MobileDiff/13957"

Navigation menu